Peter Costello

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Stamp Duty - Interview at King David School Business Breakfast- Melbourne

 

TRANSCRIPT
THE HON PETER COSTELLO, MP
TREASURER

Question & Answer
King David School Business Breakfast
Zinc at Federation Square

Melbourne
Thursday, 31 July 2003
8.20 am

SUBJECTS: Stamp Duty

QUESTION:

With respect to stamp duty that you talked about the other day and the housing boom, how reliant have the States become on the income from stamp duty and is it a realistic proposition for States to assess the level of stamp duty they may charge?

TREASURER:

Well I think it is realistic. My point is this, that we have lived through a very rapid real estate boom, and a median house which you used to buy for, let's go back to 1998, five years ago, the median house, the average house, you would pay $6000, that same house, that same median house you now pay $16,000 in stamp duty here in Victoria. That's in five years the tax burden has increased by more that 300 percent, let's say 60 per cent per annum. Because it is not just a price rise, it is the fact that as the prices have risen, the have kicked you into higher rates - what used to be called bracket creep. Now, if incomes were going up at 30 percent per annum, believe me, the Commonwealth Government would be forced to index its thresholds for Australians.

In fact we have arguments about tax cuts and we only gave the last one on 1 July, in a situation where wages are going up what, 3 percent per annum, and we lifted thresholds. You have had median values, not because anything has been done on the house necessarily, because of the property boom, going up 30 percent, and there has been no movement of thresholds and there has been no changes in rates. Now from the Commonwealth point of view, we have another point which we would like to make to you, and that is this. One of the reasons why the housing market has been strong, is, we introduced the First Home Owners Grant of $7000. Anyone who hasn't got a home and is buying their first home will get $7000. We pointed out this though, that a consequence of this would be that more people would come into the market, prices would go up, if they didn't adjust their thresholds, they would collect millions. So we are giving out a $7000 grant to a first home buyer, who is now paying what, $9000 more in stamp duty on the median house. $7000 grant, $9000 increase in stamp duty. Do you see what is happening here? It has been captured not for the benefit of the buyer, but to the benefit of the State Revenue Authority.

Now, the States would say, oh well we can't afford to cut taxes, alright, let them argue that case. But it is a question of budgeting, it is a question of budgeting. I saw the suggestion, well you asked a political question, so you are going to get a political answer. I saw one of the State Treasurers saying last night on the TV, the Federal Treasurer should abolish stamp duty. You know, he should have abolished it as part of his GST package. Let me make this point. No State asked for stamp duty to be abolished as part of the GST. In fact, they didn't want it abolished because they wanted to hang on to the revenue base, and you can see why.

Second, if you are going to be a Government, you have got to manage a tax and an expenditure position. They are Governments for heaven's sake. The idea that every revenue decision could be fobbed off to somebody else, is not consistent with the idea of sovereign government. Sovereign government has to manage a tax system and an expenditure system. Now they might want to manage a high taxation regime, in which case they should defend their high tax regime, not say it is somebody else's responsibility to fix their problem. This is their revenue base. They want this revenue base, it is a very profitable revenue base. If the public is worried about this revenue base, they should either justify it, or they should adjust it. But don't say that every single problem that arises is a responsibility for Canberra. We will look after the important economic issues for which we are responsible, a national budgetary policy, monetary policy, structural policy, income tax policy. We will look after all of those, and national defence, response to terrorism, all those sorts of things. But for goodness sakes, I do think the States can take responsibility for their own revenue base. Just an idea. Thank you very much.

 

31 Jul 2003

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